The United States and the Netherlands signed a new income tax treaty on Dec. 18, 1992 that will replace the existing treaty that came into force in 1947. The new treaty generally will enter into force 30 days after ratification by both countries.

The old treaty was extended to the Netherlands Antilles in 1955. On June 29, 1987, the United States announced that it would terminate this extension effective Jan. 1, 1988. However, on July 10, 1987, the Treasury announced that the provisions of the treaty extension relating to the withholding tax exemption for interest (Article VIII) would remain in force.

The new treaty provides for the continuation of the old treaty to the extent it applies to the Netherlands Antilles. Paragraphs 3 and 4 of Article 37 ("Entry Into Force") of the new treaty state the following:

3. Subject to the provisions of paragraph 4, the prior Convention shall cease to have effect when the provisions of this Convention take effect in accordance with paragraphs 1 and 2.

4. This Convention shall not affect any Agreement in force extending the Convention signed at Washington on April 29, 1948, in accordance with Article XXVII thereof.

This language is intended to keep the existing 1955 protocol (and related Treasury Department announcements) in force after the new treaty becomes effective. Therefore, this new treaty will not affect the Netherlands Antilles interest exemption that arose out of the 1955 protocol and the Treasury's announcements.

COPYRIGHT 1993 American Institute of CPA's
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